Natarajan believes the rally “still has legs”, with home sales momentum likely to continue on the back of “attractive” upcoming launches and “firm” buying sentiment. Hence, he is staying “buy” on APAC Realty with a higher target price of 54 cents from 48 cents previously.
Some 4,350 units of new private homes have been sold between the start of the year and May, more than double that of the 1,688 units sold over the same period last year.
These figures exclude executive condominium units, and Natarajan attributes the strong sales to the “robust” take up of projects such as Parktown Residences, The Orie and Lentor Central Residences.
Moving into 2H2025, the RHB analyst expects momentum to continue with “attractive” upcoming new launches such as Springleaf Residence, Promenade Peak and Otto Place.
“Based on our channel checks, commissions for the majority of new launches remain elevated at 2.5%-3%,” he adds.
This new sales segment is a key driver for APAC Realty’s bottomline as gross margin is in the mid-teens, double that of the resale segment, says Natarajan.
“With higher residential supply from government land sales, we expect the sales momentum to continue well into 2026. Strong primary sales should also pull up the resale market’s activity, which will likely see a 5%-10% y-o-y growth,” he adds.
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Share buybacks
In addition, management has been “actively” buying back shares, which is accretive to the company’s bottomline, says Natarajan.
APAC Realty has purchased some 4 million shares year to date, or 0.11% of the outstanding shares.
According to Natarajan, the purchased shares are expected to be used to satisfy the performance share plan (PSP) to be awarded to management, with 16 million shares to be awarded over four years as part of an incentive plan.
Natarajan says the buyback will be accretive as it will lower the cost of the PSP and also result in additional tax savings.
Lower risk of cooling measures
Natarajan also points to “moderating” residential prices, which reduce the risk of the government implementing cooling measures.
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2Q2025 flash estimates show a moderation in private and public property prices, and this comes on the back of a ramp-up in residential supply and “more realistic pricing” by developers in order to clear inventory and avoid holding costs.
Natarajan has raised his FY2025 and FY2026 net profit estimates by 5% and 3% respectively, while lowering his cost of capital assumptions by 100 basis points on “limited policy risks”.
Natarajan says APAC Realty offers an “attractive” 7% yield and trades at a “modest” 12 times FY2025 price-to-earnings (P/E).
As at 10.47am, shares in APAC Realty are trading flat at 48 cents.
